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A Historical Look at the SBA 504 Loan Program

The 504 Loan program was created in 1958 by the Small Business Administration. Its purpose is to provide 20-year fixed-rate financing options for small business owners who need more capital to purchase land, facilities, equipment, machinery and more.

(Above) Ryan Brothers Coffee in San Diego, CA. The photo features owner Tom Ryan (left) with Tim West, Vice President, Wells Fargo Bank who provided the first mortgage for the project. The SBA 504 loan was provided by CDC Small Business Finance Corp. San Diego, CA.

Loan funds may NOT be used for working capital, mortgage broker fees, bridge loans during the construction period, business inventory, rolling stock (i.e. trucks) or refinancing of existing debt of the business.

Eligibile: Companies consistent with the following criteria

Participation by another lender who finances up to 50 percent of project costs

Economic development goals must be achieved through the project financing

Owner-user of the project being financed must occupy at least 51 percent of the property for an existing building or 60 percent of a newly constructed building. Two or more unrelated small businesses can receive an SBA 504 loan if they combine to meet occupancy requirements.

Not Eligible: Companies not consistent with the following criteria

A not-for-profit (exception for sheltered workshops)

Engaged in lending; a passive holder of real estate and/or personal property; a life insurance company – however an insurance agency is eligible)

Located in a foreign country or owned by aliens who do not have legal permanent resident status

Franchises

The SBA 504 loan program can be an excellent financing option for franchisees. When evaluating a franchise opportunity, look for one listed with the FRANCHISE REGISTRY. If the franchise system is eligible for this program, you will receive expedited loan processing through the SBA.The SBA 504 loan program is not a real estate investment tool.It exists to help small businesses expand and create jobs to benefit their communities.